understanding your 1099 and end of year tax report

Our goal is to make this as simple as possible for you. You should be able to hand over your 1099 along with your P&L (Cash Flow Report) to your CPA and be done. There are a few common questions that come up every year, so hopefully this will help aleviate those.



Owner 1099 Total Calculation


Note: The IRS calculation for 1099-MISC states that the calculation is total gross income + net change in prepaid rent. In AppFolio, the gross income really means the net change in all income and other income GL account that aren't exempt from 1099. For example:  By default, owner 1099s generated from AppFolio report total gross income in the tax year per owner (not per property, though this can be selected when running 1099s).

An owner's 1099 total = the total operating income (total of all income and other income GL accounts) in the tax year + net change in prepaid rent in the tax year.


Why do we include prepaid rent? The IRS considers advance rent taxable income, even if the owner does not receive the prepaid funds until January. Review these IRS resources for more information:


KEEP IN MIND THIS ALSO MEANS THAT IF YOUR TENANT PREPAID JANUARY RENT LAST YEAR, IT WON'T BE COUNTED ON THIS YEAR'S INCOME!

UNDERSTANDING YOUR CASH FLOW STATEMENT (p&l)


  • All expenses are broken down by category. Capital Expenses can/should generally be depreciated over time instead of claimed all in one tax year. Please discuss this with your accountant. 


  • We require renters' insurance in order to protect you. If tenants do not submit their own policy, we enroll them in a policy and bill them for it. We do not include this on your owner statement as it's a direct reimbursement for their policy. Once in a while, tenants pay us in December, and it's not collected until January, so it shows up as either an income or an expense. This should be claimed and will be made up for the following year to a net zero.


  • The "Cash Flow" line at the end of this report can be ignored, as it does not account for owner distributions; it is not your actual cash flow in the traditional sense of the term.


  • Owner Contributions and Distributions are not calculated as income or expense, so do not have your CPA include them. 


Please disregard the names at the top of the report, especially those of you with your partner having a different last name or an LLC. Our system doesn't have a spot to enter both last names, so we enter them the best we can. The name on the report comes up as your name; the name given to the IRS is the legal filer's name.

BONUS TIPS


  • If you are new to renting out your home, don't forget to ask your CPA about claiming Depreciation!


  • If you have receipts you paid for during the year, feel free to ask us how we can track them on your behalf so you don't miss those deductions or have to search for invoices.



  • If you want an itemization or breakdown for the year, we can pull that report for you.